Elexon has launched a consultation on an urgent modification needed to implement and administer payment to suppliers as part of the Government’s Energy Price Guarantee.
Prime Minister Liz Truss announced the scheme in an address to the House of Commons on 8 September. It will see energy bills frozen at £2,500 for domestic customers for two years from October.
The price cap was set to jump to £3,549 for the three months from October, but this new support measure supersedes this.
While the final details of how the scheme will be funded are yet to be released – with Chancellor Kwasi Kwarteng set to unveil a mini-budget on 23 September – the Guarantee will see the Government directly paying suppliers the difference between the actual cost of energy and the £2,500 cap.
According to the Martin Lewis, the Money Saving Expert, suppliers will be provided with three month rolling contracts with the government to accommodate this.
Speaking to Current±, a spokesperson for the Department of Business, Energy and Industrial Strategy said further details on the contracts and their length will be released “in due course”.
Currently, the activities Elexon is permitted to undertake are set out in the BSC Section C ‘BSCCo and its Subsidiaries’.
These do not include a provide for administering a scheme such as the Energy Price Guarantee, as such changes to BSC Section C will be required to allow the Elexon to undertake a new non-settlement related function, i.e. administering the payment scheme.
It has therefore put forward Modification P446, which opened for consultation on 14 September. Ofgem has designated P446 as an Urgent Modification Proposal, and therefore the consultation will run for just a week – closing at 5pm on Wednesday 21 September 2022 – given the need to progress the amendment in time to implement the Energy Price Guarantee in October.
The scheme comes as power prices in Britain and Europe remain exceptionally volatile, threatening energy security as the winter approaches.
“European energy prices have increased dramatically, following the ending of lockdown and the gas crisis initiated by Russia’s invasion of Ukraine,” Elexon stated.
“Further rises are expected in the future and, as we approach winter, there are concerns over the wellbeing of those who may not be able to afford energy costs. The increase in wholesale energy costs could also have wider economic impacts, such as the impact on inflation. It is also possible that the increased energy costs could cause further Supplier failures.”
On 22 September, Current± is hosting a special edition of its Briefing’s webinar series in response to the Energy Price Guarantee. We will be joined by experts from Regen, Cornwall Insight, E3G and Green Alliance to discuss the ins and outs of the new scheme. Find out more, and register here.
